- Year: 2013
- Author: David Lagakos and Michael E. Waugh
- Journal Name: The American Economic Review
- Journal Number: Vol. 103, No. 2
- Publisher: American Economic Association
- ISBN: 00028282
- Country: United States
Cross-country labor productivity differences are larger in agriculture than in non-agriculture. We propose a new explanation for these patterns in which the self-selection of heterogeneous workers determines sector productivity. We formalize our theory in a generalequilibrium Roy model in which preferences feature a subsistence food requirement. In the model, subsistence requirements induce workers that are relatively unproductive at agricultural work to nonetheless select into the agriculture sector in poor countries. When parameterized, the model predicts that productivity differences are roughly twice as large in agriculture as non-agriculture even when countries differ by an economy-wide efficiency term that affects both sectors uniformly.